EX-99.2 4 v123291_ex99-2.htm
Exhibit 99.2
 

Vision
To be a global steel company and one of the most profitable in the sector.

Mission
Gerdau is a company focused on steelmaking, seeking to satisfy the needs of customers and
add value for shareholders, committed to the fulfillment of people and to the
sustainable development of society
 

Highlights 1st semester 2008
(International accounting standards, according to the declarations issued
by the International Accounting Standards Board - IASB)

Conference Calls

August 6th, 2008

English
02:30 p.m. (Brasília Time)
Telephones:
- Brazil: 0800 773.4613 or 11 4688-6301
- US and Canada 888 700-0802
- other countries: +1 786 924-6977
Code: Gerdau

Simultaneous Translation to Portuguese
02:30 p.m. (Brasília time)
Tephones:
- Brazil: 0800 773.4613 or 11 4688-6301
Code: Gerdau (in Portuguese)

Internet
www.gerdau.com.br/ri

Investor Relations Contact
Phone: +55 51 3323.2703
E-mail: inform@gerdau.com.br
Website: www.gerdau.com.br/ri

Gross Revenue
·
Consolidated gross revenue in the 1st semester 2008 totaled R$ 22.3 billion, 35.2% higher than the same period in 2007. This value was comprised as follows:
 
(in R$ million)
  
1st Sem./08
  
variation
  
participation
  
Brazil
    
8,013
    
39.3
%
  
35.9
%
North America
    
7,738
    
40.1
%
  
34.7
%
Latin America
    
2,243
    
33.9
%
  
10.0
%
Specialty Steel
    
4,321
    
21.6
%
  
19.4
%
TOTAL
    
22,315
    
35.2
%
  
100.0
%
 
·
We must highlight that, as from this 2nd quarter, the Specialty Steel business operation, which formerly involved only the Brazil and Spain units, now consolidates also Macsteel, in the United States, which purchase was concluded on April 23rd.

Net Income
·
In the 1st semester 2008, consolidated net income totaled R$ 3.2 billion, 38.3% higher than the same period in 2007. Net margin was 16.0% in the period.

(R$ millions)
  
1st Sem/08
 
1st Sem/07
 
variação
  
Brazil (excluded FX variation1)
    
1,380
    
928
    
48.7
%
North America
    
776
    
565
    
37.4
%
Latin America
    
304
    
257
    
18.3
%
Specialty Steel
    
376
    
292
    
28.8
%
Subtotal
    
2,836
    
2,042
    
38.9
%
FX variation1
    
378
    
282
    
34.0
%
TOTAL
    
3,214
    
2,324
    
38.3
%

1 - Foreign exchange effect on debt and financial investments in US dollars in the Brazilian companies, net of income tax.

EBITDA
·
EBITDA (earnings before interest, taxes, depreciation and amortization) has reached R$ 4.7 billion in the first six months of the year, a 51.7% growth above the value achieved in the same period in 2007. EBITDA reached 23.6% versus 21.0% in the 1st semester of last year.
 

1


Market value on June 30th, 2008
Gerdau S.A.
Bovespa: US$ 34.5 billion
 
Metalúrgica Gerdau S.A.
Bovespa: US$ 13.5 billion
 
Gerdau Ameristeel Corp.
Toronto: US$ 8.5 billion

Shares outstanding on June 30th,2008
Gerdau S.A.
Bovespa: GGBR3 e GGBR4;
NYSE: GGB; e Latibex: XGGB
ON: 496,586,494
PN:   934,793,732
1,431,380,226

Metalúrgica Gerdau S.A.
Bovespa: GOAU3 e GOAU4
ON: 137,618,994
PN:  275,062,544
412,681,538

Gerdau Ameristeel Corp.
Toronto: GNA.TO; e NYSE: GNA
ON: 432,744,747

Gross revenue reaches R$ 22.3 billion in the 1st semester 2008, 35.2% higher than the same period in 2007.

·
EBITDA achieved in the period has the following breakdown:
  
(in R$ million)
  
1st Sem./08
 
1st Sem./07
 
variation
  
Brazil
    
2,028
    
1,172
    
73.0
%
North America
    
1,558
    
989
    
57.5
%
Latin America
    
445
    
308
    
44.5
%
Specialty Steel
    
700
    
650
    
7.7
%
TOTAL
    
4,731
    
3,119
    
51.7
%

Production
·
In the first six months of this year, crude steel production (slabs, blooms and billets) totaled 10.8 million tonnes, 25.6% higher than the same period in 2007.
·
Rolled products production reached 9.2 million tonnes, presenting a growth of 27.6% in the period.

Exports
·
In the 1st semester 2008, shipments to other countries from Brazil totaled 1.4 million tonnes, generating a revenue of US$ 994.5 million. The volume shipped was reduced by 2.8% in the period. In long steel, aiming to serve the higher local market demand, the reduction was 26.0%. As for Gerdau Açominas, there has been a 13.0% increase, resulting from the new blast furnace start-up.

Selected Information
  
1st Sem.
2008
  
1st Sem.
2007
  
Variation
  
Production (1,000 tonnes) 
                    
Crude Stell (slabs/blooms/billets)
    
10,771
    
8,573
    
25.6
%
Rolled Products 
    
9,188
    
7,200
    
27.6
%
                     
Sales (1,000 tonnes)
    
10,435
    
8,317
    
25.5
%
                     
Gross Revenue (R$ million)
    
22,315
    
16,506
    
35.2
%
Net Revenue (R$ million)
    
20,044
    
14,876
    
34.7
%
EBITDA (R$ million)
    
4,731
    
3,119
    
51.7
%
Net income (R$ million)
    
3,214
    
2,324
    
38.3
%
                     
Shareholders’ equity (R$ million)
    
21,071
    
15,993
    
31.8
%
Total Assets (R$ million)
    
47,554
    
32,190
    
47.7
%
                     
Gross Margin
    
25.5
%
  
24.6
%
      
EBITDA Margin
    
23.6
%
  
21.0
%
      
Net Margin
    
16.0
%
  
15.6
%
      
                     
Net income/Shareholder’s equity1
    
24.7
%
  
27.2
%
      
                     
Net debt/Net Capitalization
    
34.2
%
  
20.2
%
      
Net debt/EBITDA2
    
1.4x
    
0.7x
        
 
1) Net income in the last 12 months over shareholder’s equity.
2) EBITDA of the last 12 months.

Dividends
·
2nd quarter 2008.
·
Payment on August 27th, 2008.
·
Base Data: Record at the close of business on August 15th (ex-dividends on August 18th).
·
Metalúrgica Gerdau S.A. will pay R$ 243.9 million (R$ 0.60 per share)
·
Gerdau S.A. will pay R$ 511.3 million (R$ 0.36 per share).
·
Accumulated in the year
 
 
2

 
Net income reaches 3.2 billion in the semester with net margin of 16.0%.
 
2nd quarter dividends will be paid on August 27th. Metalúrgica Gerdau S.A. shareholders will receive R$ 0.60 per share and Gerdau S.A. shareholders R$ 0.36 per share.

EBITDA reaches R$ 4.7 billion in the 1st semester, 51.7% higher than the value achieved in the same period in 2007. Margin is 23.6% versus 21.0% in 2007.

Crude steel production grows 25.6% in 1st semester when compared to the same period in 2007, totaling 10.8 million tonnes.

Exports from Brazil generate revenues of US$ 994.5 million in the semester, totaling 1.4 million tonnes

 
-
Metalúrgica Gerdau S.A.: R$ 373.9 million; return to shareholders (dividends per share/preferred share price on June 30th) was 2.7%.
 
- Gerdau S.A.: R$ 802.5 millin; return to shareholders (dividends per share/preferred share price on June 30th) was 2.2%.
  
 
Capital Increases
·
Offering of 19.2 million shares issued by Metalúrgica Gerdau S.A and 48.1 million stocks issued by Gerdau S.A was concluded in April.
   
·
 Price defined in bookbuilding:R$ 78.35 per shares for Metalúrgica Gerdau S.A. and R$ 60.30 per share for Gerdau S.A.,
 
  
·
The funds resulting from the capital increase of Metalúrgica Gerdau S.A., amounting to R$ 1.5 billion, were aimed at exercising its priority in the capital increase of Gerdau S.A.
 
  
·
The capital increase of R$ 2.9 billion at Gerdau S.A. had the purpose of improving the capital structure in the Company, as well as the payment of acquisitions.
 
Stock Split
·
During Shareholders’ Meetings held on May 30th, was approved a Stock Split of 100% for Metalúrgica Gerdau S.A. and for Gerdau S.A., using Capital and Profit Reserves.
·
The amount of reserves capitalized totaled R$ 1.7 billion for Metalúrgica Gerdau S.A. and R$ 3.5 billion for Gerdau S.A. As a result of the Stock Split, the Capital Stock of these companies became R$ 6.9 billion and R$ 14.2 billion, respectively.
 
Acquisition in Brazil
·
Aços Villares S.A.
- Acquisition of complementary interests of 28.9% from BNDESPAR.
- Closed on June 16th, 2008.
- Investment of US$ 800 million (R$ 1.3 billion).
- With the acquisition, Gerdau, holds now 87.3% of the Aços Villares capital stock along with Corporación Sidenor (Spain).
- Aços Villares is a specialty steel (Special Bar Quality - SBQ) and mill rolls producer. It operates three mini mills located in Pindamonhangaba, Mogi das Cruzes and Sorocaba, all within São Paulo State.

Acquisitions in North America
·
MacSteel steel operation (United States)
- Closed on April 23rd, 2008 (announced on November 19th, 2007).
- MacSteel is the second largest producer of Specialty Steel (Special Bar Quality - SBQ) in the United States. MacSteel operates three mini-mills, located in Jackson, Michigan; Monroe, Michigan; and Fort Smith, Arkansas. The company also operates six downstream operations located in the states of Michigan (two), Ohio, Indiana (two) and Wisconsin. MacSteel has an installed capacity of 1.2 million tonnes of crude steel and 1.1 million tonnes of rolled
products per year.

 
3

 
 
Metalúrgica Gerdau S.A. and Gerdau S.A. conclude capital increase of approximately R$ 1.5 billion and R$ 2.9 billion, respectively. Metalúrgica Gerdau issued 19.2 million stocks at R$ 78.35 per stock and Gerdau S.A. issued 48.1 million stocks at R$ 60.30 per stock.

Shareholders approve 100% stock split aiming to increase stocks liquidity and facilitate investors’ access by reducing the standard lot price.

Acquisitions announced and closed this year represent investments of US$ 3.3 billion and business expansion in Brazil and abroad.

- Investment of US$ 1.5 billion plus the assumption of debt and certain liabilities of approximately US$ 215 million.

·
Century Steel, Inc (United States)
- Acquired via joint venture Pacific Coast Steel (PCS).
- Closed on April 1st, 2008 (announced on February 12th, 2008).
- Century Steel, headquartered in Las Vegas, Nevada, operates reinforcing and structural steel contracting businesses in Nevada, California, Utah and New Mexico, with fabrication facilities that have an annual capacity in excess of 250,000 tonnes per year.
- Investment of US$ 148.5 million.
- Concurrently with the acquisition of Century, Gerdau Ameristeel has also increased its equity participation to 84% in PCS with an investment of US$ 82.0 million.

·
Hearon Steel (United States)
- Closed on July 14th, 2008.
- Hearon operates in the reinforcing and structural steel business in Muskogee, Tulsa and Oklahoma City, Oklahoma.
- Investment of nearly US$ 15.0 million.

Acquisition in Latin America
·
Diaco S.A. (Colombia)
-  Acquisition of an additional participation of 40.2%.
-  Closed on January 14th, 2008.
-  With this acquisition, Gerdau holds now 98.7% of the capital stock in this company.
-  Investment was US$ 107.2 million.
-  Diaco is the largest producer of long steel in Colombia.

·
Trefilados Bonati S.A. (Chile)
- Closed on January 2008.
- Trefilados Bonati is a wire and nail manufacturer.
- Investment of US$ 7.5 million.

·
Cleary Holdings Corp. (Colombia)
-  Acquisition of 50.9% interests.
-  Announced on February 21st, 2008 and closed on June 4th, 2008.
-  Cleary Holdings Corp. controls coke production units and coking coal reserves in Colombia. The company current annual capacity is 1.0 million tonnes of coke, and its coking coal reserves are estimated to be 20 million tonnes. The entire production is exported mainly to the United States, Peru, Canada and Brazil.
-  Investment of US$ 59 million.

·
Corsa Controladora, S.A. de C.V. (Mexico)
-  Closed on February 27th, 2008 (announced on October 19th, 2007).
-  Acquisition of a 49% interest in the capital stock. The company holds 100% of the capital stock of Aceros Corsa, S.A. de C.V. and also controls two distributors of steel products.
-  Investment of US$ 110.7 million.
 
 
4


Additional Information

This document and the complementary information related to the 2nd quarter 2008 are available at www.gerdau.com.br/ri.

-  Aceros Corsa, located in the city of Tlalnepantla, in the metropolitan region of Mexico City, is a long steel mini-mill producer (light commercial profiles) with an installed capacity of 150 thousand tonnes of crude steel and 300 thousand tonnes of rolled products annually.
-  The Gerdau Group and Corsa Controladora’s shareholders have also formalized a joint venture to implement a project for the production of structural profiles in Mexico. The project, which estimates US$ 400 million in investment, contemplates an annual installed capacity of 1.0 million tonnes of crude steel and 700 thousand tonnes of rolled products. The mill will begin its operations in 2010.

·
Corporación Centroamericana del Acero S.A. (Guatemala)
- Strategic alliance with the controllers of the Corporación Centroamericana del Acero S.A. holding company, which holds steelmaking assets in Guatemala and Honduras and distribution in El Salvador, Nicaragua and Belize. As a result of this alliance, the Gerdau Group takes over a 30% share of the company’s social capital.
-  Announced on April 21st, 2008.
-  Investment of approximately US$ 180 million.
- The steelmaking assets include a melt shop with an installed capacity of 500,000 tonnes of crude steel and rolling mills with an annual capacity of 690,000 tonnes for producing rebar profiles, seamed tubes and flat bars, as well as drawn products and downstream operations to produce wire mesh, galvanized, annealed, and barbed wires, nails and metal roofs.

·
Barracas Janssen Ltda. (Chile)
- Closed on May 2008.
- Barracas Janssen operates in construction supplies distribution and trade.
- Investment of US$ 5.6 million.

Acquisitions in Europe
·
Rectificadora del Vallés (Spain)
- Acquired via Sidenor.
- Closed on May 30th, 2008.
- del Vallés is a mechanical, automotive and construction bars producing unit.
- Investment of US$ 49.8 million, plus US$ 51.3 million in debt.

·
Vicente Gabilondo e Hijos S.A. (Spain)
- Acquired via Sidenor.
- Closed on June 3rd, 2008.
- Gabilondo is a mechanical, automotive and construction bar producing unit.
- Investment of US$ 21.8 million.

 
5


Second quarter 2008 Performance

International accounting standards, according to the declarations issued
by the International Accounting Standards Board - IASB)

Production and Shipments

·
In the 2nd quarter 2008, crude steel production at Gerdau companies reached 5.6 million tonnes, 26.2% higher than the volume produced in the 2nd quarter in 2007. In the compared period Chaparral and Macsteel productions in the United States were consolidated.

·
Particularly in Brazil the growth of 15.8% in crude steel production is partially due to the new blast furnace at Gerdau Açominas. North America operations presented 39.1% increase mainly due to the incorporation of the Chaparral production volume. The same is valid for the Specialty Steel operation, where Macsteel consolidation, as of April 23rd also allowed an increase from 599 thousand tonnes in the produced volume in the 2nd quarter 2007 to 831 thousand tonnes in the 2nd quarter 2008 (+38.6%). In Latin America, good market conditions have allowed to increase steel production by 4.7% in the period.
 

Production
(1,000 tonnes)
 
2Q08
 
2Q07
 
Variation
2Q08/2Q07
 
1Q08
 
Variation
2Q08/1Q08
  
Crude Steel (slabs, blooms and billets)
                                
Brazil 1
    
2,024
    
1,748
    
15.8
%
  
1,893
    
6.9
%
North America 2
    
2,272
    
1,633
    
39.1
%
  
2,202
    
3.2
%
Latin America 3
    
517
    
494
    
4.7
%
  
453
    
14.1
%
Specialty steel 4
    
831
    
599
    
38.7
%
  
579
    
43.5
%
Total
    
5,644
    
4,474
    
26.2
%
  
5,127
    
10.1
%
                                 
Rolled Products
                                
Brazil 1
    
1,241
    
1,036
    
19.8
%
  
1,185
    
4.7
%
North America 2
    
2,183
    
1,587
    
37.6
%
  
2,089
    
4.5
%
Latin America 3
    
560
    
514
    
8.9
%
  
548
    
2.2
%
Specialty Steel 4
    
805
    
595
    
35.3
%
  
577
    
39.5
%
Total
    
4,789
    
3,732
    
28.3
%
  
4,399
    
8.9
%
 
1 - Does not include specialty steel operations
2 - Does not include Mexico and specialty steel operations (MacSteel)
3 - Does not include operations in Brazil
4 - Includes specialty steel operations in Brazil, Europe and the USA
Note: the information above does not include data from shared controlled companies and joint ventures.



6


·
In rolled products, the production reached 4.8 million tonnes in the 2nd quarter of the year, exhibiting a growth of 28.3% when compared to the volume of the same period in 2007. Similarly to crude steel, also in rolled products, the new capacities added in the period had major role on the observed increase.

·
Consolidated sales of the 2nd quarter 2008 totaled 5.5 million tonnes, 32.1% higher than the volume sold in the 2nd quarter 2007. The consolidation of new companies as of the second half of last year has also had an important participation in the growth occurred in the period.

Consolidated Shipments 1
(1,000 tonnes)
  
2Q08
 
2Q07
 
Variation
2Q08/2Q07
 
1Q08
 
Variation
2Q08/1Q08
  
Brazil 2
    
1,818
    
1,478
    
23.0
%
  
1,621
    
12.2
%
Domestic market
    
1,284
    
954
    
34.6
%
  
1,175
    
9.3
%
Exports
    
534
    
524
    
1.9
%
  
446
    
19.7
%
                                 
North America 3
    
2,268
    
1,577
    
43.8
%
  
2,158
    
5.1
%
                                 
Latin America 4
    
624
    
573
    
8.9
%
  
621
    
0.5
%
                                 
Specialty Steel 5
    
785
    
532
    
47.6
%
  
540
    
45.4
%
                                 
Consoildated Total
    
5,495
    
4,160
    
32.1
%
  
4,940
    
11.2
%

1 - Excluding shipments to controlled companies.
2 - Does not include special steel operations
3 - Does not include Mexico and specialty steel operations (MacSteel)
4 - Does not include operations in Brazil
5 - Includes specialty steel operations in Brazil, Europe and the US
Note: the information above does not include data from shared controlled companies and joint ventures.

·
The continuity in the strong demand in the several consuming segments for long steels, such as civil construction, automotive and agricultural machinery, enabled a growth of 34.6% in the Gerdau sales for the domestic market in this 2nd quarter when compared to the same period in 2007.

·
Exports from Brazil, including shipments to subsidiaries, totaled 759.9 thousand tonnes, thus generating revenues of US$ 616.6 million.
-
·
In the United States and Canada, the consolidation of new units contributed to the growth of sales by 43.8% in the 2nd quarter 2008 when compared to the same period in the previous year.

·
In Latin America, sales increased 8.9% in the 2nd quarter 2008, compared to the same period in 2007, reflecting good market conditions in the region.

·
In Specialty steel, Macsteel consolidation as from April 23rd allowed an increase of 47.6% in the shipments of those products during 2nd quarter of this year when compared to the 2nd quarter of 2007.
 

1 Excluding shipments to subsidiaries

Results

·
Consolidated net revenue reached R$ 11.1 billion in the 2nd quarter 2008, exhibiting a growth of 47.2% when compared to the 2nd quarter 2007. Demand for steel products in all the regions where Gerdau has operations and the consolidation of the companies acquired were responsible for the result achieved in the period.
 

7


·
Operations in Brazil (domestic market plus exports) have contributed with 32.2% of the consolidated net revenue of the quarter. Meanwhile, North America units answered for 37.6% and Latin America companies for 10.0%. Specialty Steel business operation answered for the remaining 20.2% of the net revenue from the period.

Net Revenue
(R$ million)
  
2Q8
 
2Q07
 
Variation
2Q08/2Q07
 
1Q08
 
Variation
2Q08/1Q08
  
Brazil 1
    
3,576
    
2,425
    
47.5
%
  
2,906
    
23.0
%
North America 2
    
4,170
    
2,628
    
58.7
%
  
3,509
    
18.8
%
Latin America 3
    
1,113
    
845
    
31.7
%
  
950
    
17.2
%
Specialty Steel 4
    
2,241
    
1,643
    
36.4
%
  
1,579
    
41.9
%
Total
    
11,100
    
7,541
    
47.2
%
  
8,944
    
24.1
%

1 - Does not include specialty steel operations
2 - Does not include Mexico and specialty steel operations (MacSteel)
3 - Does not include operations in Brazil
4 - Includes specialty steel operations in Brazil, Europe and the US
Note: the information above does not include data from shared controlled companies and joint ventures.

·
Sales cost, as a percentage of net revenue, was reduced from 74.9%, in the 2nd quarter 2007, to 73.2%, in the 2nd quarter 2008, improving the gross margin from 25.1% to 26.8% in the period. Such figures are a result of the international steel products price increase which has slightly surpassed the costs of the main raw materials, mainly due to preset defined prices in supply agreements.

·
Sales, general and administrative expenses exhibited a reduction compared to the net revenue. In the 2nd quarter 2008, they represented 6.7% and in the same period, in 2007, they corresponded to 8.5%. This decrease is mainly attributed to the dilution of the fixed costs embedded into such accounts as a result of the relevant increase of the sales volume in the period. 


EBITDA
(R$ million)
  
2Q08
 
2Q07
 
Variation
2Q08/2Q07
 
1Q08
 
Variation
2Q08/1Q08
  
Brazil 1
    
1,208
    
612
    
97.4
%
  
821
    
47.3
%
North America 2
    
875
    
469
    
86.6
%
  
683
    
28.1
%
Latin America 3
    
289
    
185
    
56.2
%
  
156
    
85.3
%
Specialty Steel 4
    
375
    
331
    
13.3
%
  
325
    
15.4
%
Total
    
2,747
    
1,597
    
72.0
%
  
1,985
    
38.4
%
 
1 - Does not include specialty steel operations
2 - Does not include Mexico and specialty steel operations (MacSteel)
3 - Does not include operations in Brazil
4 - Includes specialty steel operations in Brazil, Europe and the US

EBITDA Composition
(R$ million)
  
2Q08
 
2Q07
 
Variation
2T08/2T07
 
1Q08
 
Variation
2Q08/1Q08
  
Net income
    
2,124
    
1,146
    
85.3
%
  
1,090
    
94.9
%
Provision for Income Tax and social Contribution
    
649
    
296
    
119.3
%
  
308
    
110.7
%
Net financial Result
    
(435
)
  
(149
)
  
191,9
%
  
164
    
-
  
Depreciation and amortization
    
409
    
304
    
34.5
%
  
423
    
(3.3
)%
EBITDA
    
2,747
    
1,597
    
72.0
%
  
1,985
    
38.4
%

 
8


·
EBITDA (earnings before interest, taxes, depreciation and amortization), which represents generation of operating cash flow, reached R$ 2.7 billion in the 2nd quarter 2008, 72.0% above the value achieved in the same period in 2007. Lower operational expenses increase in the period and better performance of the companies assessed by the equity equivalence had great influence on the EBITDA, which presented an increase much higher than the net revenue of the period.

·
EBITDA margin, in consolidated terms, reached 24.7% versus 21.2% in the 2nd quarter 2007.


·
The result from the equity equivalence on the investments at non-consolidated companies reached R$ 81.9 million in the quarter versus R$ 33.0 million in the 2nd quarter 2007.

·
In the 2nd quarter this year, due to Real appreciation compared to the American Dollar, there has been a positive financial result of R$ 434.8 million. The same happened in the 2nd quarter 2007, when it was R$ 148.9 million. The exchange impact over assets and liabilities was R$ 558.3 million in the 2nd quarter of this year versus R$ 249.9 million in the same period of 2007.

·
As a consequence of the better operational performance and financial results, consolidated net income reached 2.1 billion in the 2nd quarter 2008, 85.4% higher when compared to the same period in 2007. Net margin grew from 15.2% to 19.1%.

Net income
(R$ million)
  
2Q08
 
2Q07
 
Variation
2Q08/2Q07
 
1Q08
 
Variation
2Q08/1Q08
  
Brazil (excluded FX variation1)
    
886
    
451
    
96.5
%
  
494
    
79.4
%
North America 2
    
467
    
258
    
81.0
%
  
310
    
50.6
%
Latin America 3
    
209
    
134
    
56.0
%
  
95
    
120.0
%
Specialty Steel 4
    
213
    
139
    
53.2
%
  
162
    
31.5
%
Subtotal
    
1,775
    
982
    
80.8
%
  
1,061
    
67.3
%
FX variation 5
    
349
    
164
    
112.8
%
  
29
    
1,103.4
%
Total
    
2,124
    
1,146
    
85.3
%
  
1,090
    
94.8
%

1 - Does not include specialty steel operations
2 - Does not include Mexico and specialty steel operations (MacSteel)
3 - Does not include operations in Brazil
4 - Includes specialty steel operations in Brazil, Europe and the US
5 - FX effect on debt and financial investments in US dollars in the Brazilian companies, net of income tax.

Investments

·
Investments in fixed assets totaled US$ 380 million in the 2nd quarter 2008, accumulating R$ 659 million in the period from January to June, this year.

·
This year Gerdau invested in acquisitions, both announced and closed, US$ 3.3 billion. MacSteel’s, acquisition was US$ 1.7 billion, including incurred debt.
 
 
9


Investments
(US$ million)
  
1Q08
 
2Q08
 
Total
1st Sem. 2008
  
Brazil 1
    
157
    
232
    
389
  
Fixed Assets
    
157
    
232
    
389
  
                     
North America 2
    
28
    
279
    
307
  
Fixed Assets
    
28
    
33
    
61
  
Acquisitions (including debts assumed)
    
-
    
246
    
246
  
                     
Latin America 3
    
287
    
298
    
585
  
Fixed Assets
    
62
    
53
    
115
  
Acquisitions (including debts assumed)
    
225
    
245
    
470
  
                     
Specialty Steel 4
    
32
    
2,658
    
2,690
  
Fixed Assets
    
32
    
62
    
94
  
Acquisitions (including debts assumed)
    
-
    
2,596
    
2,596
  
                     
Consolidated Total
    
504
    
3,467
    
3,971
  
Fixed Assets
    
279
    
380
    
659
  
Acquisitions (including debts assumed)
    
225
    
3,087
    
3,312
  

1 - Does not include specialty steel operations
2 - Does not include Mexico and specialty steel operations (MacSteel)
3 - Does not include operations in Brazil
4 - Includes specialty steel operations in Brazil, Europe and the US
Note: Acquisitions include those announced and concluded this year

Financial Liabilities

·
Net debt (loans and financing, plus debentures, minus cash and cash equivalents) on June 30th this year, totaled R$ 10.9 billion, representing 1.4 times the EBITDA generated in the last twelve months.

·
Considering only the gross debt (loans and financing, plus debentures), 19.1% were short term (R$ 3.1 billion) and 80.9% long term (R$ 13.3 billion).
 
·
On June 30th, gross debt was comprised of 18.8% in Brazilian reais, 16.2% in foreign currency contracted by the companies in Brazil, and 65.0% in different currencies contracted by the subsidiaries abroad.

·
In June, cash and cash equivalents, plus financial investments, amounted to R$5.6 billion, with 45.3% in foreign currency, primarily American dollars.
 
Indebtedness
(R$ million)
  
06.30.2008
  
12.31.2007
  
Short Term
              
Local Currency (Brazil)
    
796
    
1,163
  
Foreign Currency (Brazil)
    
570
    
496
  
Companies abroad
    
1,777
    
880
  
Total
    
3,143
    
2,539
  
               
Long Term
              
Local Currency (Brazil)
    
2,306
    
2,555
  
Foreign Currency (Brazil)
    
2,095
    
2,570
  
Companies abroad
    
8,939
    
8,239
  
Total
    
13,340
    
13,364
  
               
Gross Debt
    
16,483
    
15,903
  
Cash and cash equivalents
    
5,557
    
5,139
  
               
Net Debt
    
10,926
    
10,764
  


10


·
The long term debt amortization schedule, including debentures, on June 30th, was:

Year
    
R$ million
  
2009 (July to December)
    
512
  
2010
    
1,689
  
2011
    
1,761
  
2012 and later
    
9,378
  
Total
    
13,340
  

·
The main ratios of Gerdau companies at the end of June are shown below:

Ratios
  
06.30.2008
  
12.31.2007
  
Net debt /Total net capitalization
    
34.2
%
  
39.3
%
Gross debt / EBITDA1
    
2.1x
    
2.5x
  
Net debt / EBITDA1
    
1.4x
    
1.7x
  
1 -Last 12 months

Results from the non-consolidated companies

·
In the 2nd quarter 2008, the companies listed below, in which Gerdau has shared control or joint ventures, or are associated companies, were not consolidated and their results were evaluated by equity equivalence:

Gallatin Steel Company, USA;
Bradley Steel Processors and MRM Guide Rail, Canada;
Armacero Industrial y Comercial S.A., Chile;
Multisteel Business Holdings Corp. and subsidiaries, in the Dominican Republic;
Corsa Controladora, S.A. de C.V. and subsidiaries, Mexico;
SJK Steel Plant Limited, in India;
Corporación Centroamerica del Acero S.A., in Guatemala;
Dona Francisca Energética S.A., Brazil.

·
Considering the respective shareholding interests, these companies traded 302.1 thousand tonnes of steel products in the quarter, which resulted in a net revenue of R$ 561.4 million. The equity equivalence of these interests was R$ 81.9 million in the 2nd quarter 2008.

APIMEC Meeting

·
In the period from May 26th to 28th, Gerdau held a Meeting with the Investment Analysts and Professionals of the Capital Market (APIMEC), in the state of Minas Gerais. The event was attended by 140 investment experts, associated to six regional offices of APIMEC, who had the opportunity of visiting the industrial facilities at Gerdau Açominas, in Ouro Branco and the two Iron Ore Reserves in that region. The agenda started on May 26th with a welcome dinner and was closed on May 28th, with a presentation on the performance of Gerdau companies in the 1st quarter this year.
 

11


Considering the change of the accounting standards, the Consolidated Financial Statements in IFRS are filed at CVM and Bovespa via IPE System, in the “Economical-Financial Data” category, and thus, there is no information consolidated by the Brazilian accounting standards in the Groups 6 to 8 of the Quarterly Information - ITR.
 
GERDAU S.A. and subsidiaries
CONSOLIDATED BALANCE SHEET
In thousands of Brazilian reais (R$)
 
   
06/30/2008*
 
12/31/2007
 
CURRENT ASSETS
             
Cash and cash equivalents
   
2.042.962
   
2.026.096
 
Temporary cash investments
              
Trading securities
   
3.426.244
   
2.836.903
  
Available-for-sale securities
   
88.221
   
276.374
 
Trade accounts receivable
   
4.525.362
   
3.172.316
 
Inventories
    
7.489.684
   
6.056.661
 
Tax credits
   
400.783
   
598.317
 
Prepaid expenses
   
97.238
   
108.690
 
Unrealized gains on derivatives
   
266
   
14
 
Other receivables
   
212.239
   
237.602
 
     
18.282.999
   
15.312.973
 
NON CURRENT ASSETS
             
Temporary cash investments
   
86.313
   
-
  
Tax credits
   
581.299
   
594.894
 
Deferred income taxes
   
900.601
   
933.851
 
Unrealized gains on derivatives
   
65.359
   
1.553
 
Prepaid expenses
   
100.062
   
110.207
 
Escrow deposits
   
225.477
   
223.735
 
Other receivables
   
522.893
   
290.783
 
Prepaid pension cost
   
463.272
   
417.723
 
Investments accounted for under the equity method
   
1.260.782
   
628.242
 
Other investments
   
18.623
   
18.623
 
Goodwill
   
7.450.423
   
6.043.396
 
Intangible assets
   
1.263.337
   
1.073.715
 
Property, plant and equipment, net
    
16.332.441
    
15.827.944
  
 
    
29.270.882
    
26.164.666
  
           
 
  
TOTAL ASSETS
    
47.553.881
    
41.477.639
 
 
*Reviewed by independent auditors to the extent described in the report dated August 6, 2008


12


GERDAU S.A. and subsidiaries
CONSOLIDATED BALANCE SHEET
In thousands of Brazilian reais (R$)
 
 
  
06/30/2008*
 
12/31/2007
  
CURRENT LIABILITIES  
          
Trade accounts payable
   
3.449.245
   
2.586.634
 
Loans and financing
   
3.011.824
   
2.500.985
 
Debentures
   
131.185
   
38.125
 
Taxes payable
   
777.789
   
462.311
 
Payroll
   
526.459
   
518.098
 
Dividends payable
   
11.205
   
392
 
Unrealized losses on derivatives
   
1.648
   
1.964
 
Other payables
   
499.329
   
478.639
 
     
8.408.684
    
6.587.148
  
NON CURRENT LIABILITIES
             
Loans and financing
   
12.585.912
   
12.461.128
 
Debentures
   
753.988
   
903.151
 
Deferred income and social contribution taxes
   
2.612.559
   
2.315.771
 
Unrealized losses on derivatives
   
10.752
   
16.106
 
Reserve for contingencies
   
435.630
   
489.103
 
Employees benefits
   
661.822
   
794.125
 
Minority interest put options
   
555.264
   
889.440
 
Other payables
   
458.390
   
379.589
 
     
18.074.317
    
18.248.413
  
SHAREHOLDERS' EQUITY
             
Capital
   
14.184.805
   
7.810.453
 
Treasury stocks
   
(123.453
)
  
(106.667
)
Valuation adjustments
   
8.129
   
13.723
 
Legal reserve
   
-
    
278.713
 
Retained earnings
   
4.736.944
   
5.765.616
 
Cumulative translation adjustment
   
(1.952.461
)
  
(1.049.333
)
PARENT COMPANY'S INTEREST
   
16.853.964
   
12.712.505
 
               
MINORITY INTEREST
   
4.216.916
   
3.929.573
 
               
SHAREHOLDERS' EQUITY
    
21.070.880
    
16.642.078
 
               
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY
    
47.553.881
    
41.477.639
  
 
*Reviewed by independent auditors to the extent described in the report dated August 6, 2008


13

 
GERDAU S.A. and subsidiaries
CONSOLIDATED STATEMENT OF INCOME
In thousands of Brazilian reais (R$)

   
Three-months period ended
 
Six-months period ended
 
 
 
06/30/2008*
 
06/30/2007*
 
06/30/2008*
 
06/30/2007*
 
NET SALES
    
11.099.928
    
7.540.920
    
20.044.438
    
14.876.061
 
Cost of sales
    
(8.119.679
)
  
(5.647.105
)
  
(14.931.856
)
  
(11.213.506
)
GROSS PROFIT
    
2.980.249
    
1.893.815
    
5.112.582
    
3.662.555
  
Selling expenses
   
(182.676
)
  
(159.677
)
  
(334.159
)
  
(302.495
)
General and administrative expenses
   
(558.483
)
  
(480.498
)
  
(1.064.349
)
  
(915.375
)
Other operating income
   
57.425
   
17.820
   
83.668
   
27.913
 
Other operating expenses
   
(40.614
)
  
(11.930
)
  
(40.614
)
  
(11.930
)
INCOME FROM OPERATIONS
   
2.255.901
   
1.259.530
   
3.757.128
   
2.460.668
 
Equity in subsidiaries
   
81.874
   
32.961
   
142.707
   
68.017
 
INCOME BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES
   
2.337.775
   
1.292.491
   
3.899.835
   
2.528.685
 
Finacial revenues
   
226.425
   
184.804
   
346.144
   
429.178
 
Financial expenses
   
(361.428
)
  
(252.963
)
  
(714.972
)
  
(489.236
)
Exchange variations, net
   
558.346
   
249.002
   
601.968
   
426.843
 
Gain and losses on derivatives, net
   
11.449
   
(31.974
)
  
37.355
   
27.953
 
INCOME BEFORE TAXES
   
2.772.567
   
1.441.360
   
4.170.330
   
2.923.423
 
Provision for income and social contribution taxes
                         
Current
   
(559.886
)
  
(279.029
)
  
(893.758
)
  
(573.158
)
Deferred
   
(88.847
)
  
(16.472
)
  
(62.621
)
  
(26.341
)
     
(648.733
)
  
(295.501
)
  
(956.379
)
  
(599.499
)
NET INCOME
   
2.123.834
   
1.145.859
   
3.213.951
   
2.323.924
 
ATTRIBUTED TO:
                         
Parent company's interest
   
1.863.596
   
944.242
   
2.737.978
   
1.941.155
 
Minority interests 
    
260.238
    
201.617
   
475.973
    
382.769
  
 
    
2.123.834
    
1.145.859
    
3.213.951
    
2.323.924
  
Basic earnings per share - preferred and common
   
1,75
   
1,43
   
2,72
   
2,93
 
Diluted earnings per share - preferred and common
   
1,74
   
1,41
   
2,70
   
2,90
 
 
*Reviewed by independent auditors to the extent described in the report dated August 6, 2008


14

 
GERDAU S.A. and subsidiaries
CONSOLIDATED STATEMENT OF INCOME
In thousands of Brazilian reais (R$)

   
Six-months period ended
 
   
06/30/2008
 
06/30/2007
 
Cash flows from operating activities
             
Net income (including minority interest)
    
3.213.951
   
2.323.924
  
Adjustments to reconcile net income to net cash
              
provided by operating activities:
             
Depreciation and amortization
    
831.439
   
590.650
  
Equity in subsidiaries
    
(142.707
)
  
(68.017
)
Exchange variation
    
(601.968
)
  
(434.527
)
Gains on derivatives, net
    
(37.354
)
  
(50.842
)
Post-employment benefits and stock-based compensation
    
19.402
   
59.388
  
Stock based remuneration
    
(39.680
)
  
4.648
  
Deferred income and social contribution taxes
    
62.621
   
26.341
  
Loss on disposal of property, plant and equipment and investments
    
24.941
   
18.648
  
Provision for losses on avaible-for-sale securities
    
63.152
    
-
  
Allowance for doubtful accounts
    
11.743
   
7.647
  
Reserve for contingencies
    
(40.317
)
  
109.695
  
Distributions from joint ventures
    
63.729
   
65.339
  
Interest income
    
(241.036
)
  
(361.273
)
Interest expense
    
489.617
   
347.282
  
     
3.677.533
   
2.638.903
 
Changes in assets and liabilities:
             
Increase in trade accounts receivable
    
(1.215.743
)
  
(795.625
)
Increase (decrease) in inventories
    
(1.326.624
)
  
(170.584
)
Increase (decrease) in trade accounts payable
    
(167.265
)
  
350.343
 
Decrease of other receivables
    
706.911
   
80.439
 
Increase (decrease) of other payables
    
(130.663
)
  
574.904
 
Trading securities
    
(2.887.823
)
  
(83.706
)
Redemption of trading securities
    
2.543.548
   
1.519.425
 
               
Cash provided by operating activities
    
1.199.874
   
4.114.099
 
Interest paid on loans and financing
    
(454.115
)
  
(327.472
)
Income and social contribution taxes paid
    
(484.615
)
  
(423.689
)
Net cash provided by operating activities    
    
261.144
    
3.362.938
  
               
Cash flows from investing activities
             
Additions to property, plant and equipment
    
(967.367
)
  
(1.372.388
)
Payments for business acquisitions
    
(2.772.715
)
  
(789.883
)
Interest received on cash investments
    
(72.297
)
  
(155.966
)
Net cash used in investing activities
    
(3.812.379
)
  
(2.318.237
)
               
Cash flows from financing activities
              
Capital increase/Treasury stock
    
2.901.966
   
-
  
Dividends and interest on capital paid
    
(661.955
)
  
(836.809
)
Borrowings
    
3.509.942
   
1.592.076
 
Repayment of loans and financing
    
(2.321.239
)
  
(1.626.289
)
Intercompany loans, net
    
282.315
   
(141.046
)
Redemption of consolidated investment fund
    
-
    
(78.582
)
Net cash provided by (used in) financing activities
    
3.711.029
    
(1.090.650
)
               
Exchange variation on cash and cash equivalents
    
(142.928
)
  
(49.507
)
               
Increase in cash and cash equivalents
   
16.866
   
(95.456
)
Cash and cash equivalents at beginning of period
    
2.026.096
    
1.070.524
 
Cash and cash equivalents at end of period
    
2.042.962
    
975.068
  
 
*Reviewed by independent auditors to the extent described in the report dated August 6, 2008


15

 
·
The Company information (non-consolidated) listed below is compliant with the corporate legislation and the Brazilian accounting standards. The Financial Statements of these companies will continue being used as the basis for paying dividends or interests on capital.

Metalúrgica Gerdau S.A.

·
Dividends in the 2nd quarter 2008.
-Payment on August 27th, 2008, based on the positions on August 15th, (ex-dividends on August 18th).
-Shareholders will receive R$ 243.9 million (R$ 0.60 per share).
-Year accumulated: R$ 373.9 million; return to shareholders (dividends per share/preferred share price on June 30th) considering dividends and interests on capital paid in the last four quarters, was 2.7%.

·
Shareholders Meeting, held on May 30th, approved a stock split of 100% using Capital and Profits Reserve. The amount of the capitalized reserves totaled R$ 1.7 billion, and with such the corporate capital became R$ 6.9 billion.

·
Share liquidity
 
-
In the 1st semester 2008, Metalúrgica Gerdau S.A. (GOAU) stock trade transactions totaled R$ 5.8 billion in the São Paulo Stock Exchange, 105.9% higher than in the same period in 2007.
 
-
The average daily trade value for preferred stocks was R$ 45.5 million this year.
 
-
In the semester 144,053 transactions were carried out with the Company stocks 61.2% higher than in the period from January to June, 2007.
 
-
The number of traded stocks reached 76.8 million until June this year versus 56.3 million in the same period in 2007 (+36.5%).


·
In the first semester of 2008, the preferred stocks of the company had an appreciation of 48.4% versus 1.8% of IBOVESPA.

·
In the second quarter of 2008, net income of Metalúrgica Gerdau S.A. reached R$ 657.1 million, equivalent to R$ 1.62 per share. This profit was basically originated from the equity equivalence on the investments in controlled/associated companies and was 66.1% higher than the 2nd quarter 2007. In the year accumulated (1st semester 2008), net income reached R$ 972.3 million, 22.3% higher than the same period in 2007.

·
On June 30th, 2008, the net equity of the Company was R$ 7.3 billion, representing a book value of R$ 17.98 per share.

Gerdau S.A.

·
Dividends in the 2nd quarter 2008.
 

16


-Payment on August 27th, 2008, based on the shares positions on August 15th (ex-dividends on August 18th).
-Shareholders will receive R$ 511.3 million (R$ 0.36 per share).
-Year Accumulated: R$ 802.5 million; return to shareholders (dividends per share/preferred share price on June 30th), considering dividends and interests on capital paid in the last four quarters, was 2.2%.

·
Shareholders Meeting, held on May 30th, approved a stock split of 100% using Capital and Profit Reserves. The amount of the capitalized reserves totaled R$ 3.5 billion, and with such the corporate capital became R$ 14.2 billion.

· Share Liquidity
 
-
São Paulo Stock Exchange
In the first semester of 2008, Gerdau S.A. (GGBR) stock trade transactions totaled R$ 16.9 billion, 116.5% higher than the value in the same period in 2007.
The average daily trade value for preferred stocks was R$ 125.7 million.
546.348 stock trade transactions were made until June this year, 104.1% higher than in the first six months of the previous year.
The number of stocks traded totaled 306.2 million in the semester, 51.3% higher than that in the same period in 2007.
Until June, preferred stocks had an appreciation of 49.4% versus 1.8% of IBOVESPA.

 
-
New York Stock Exchange (NYSE)
Gerdau S.A. (GGB) ADRs trade transactions totaled US$ 14.3 billion in the first semester of 2008, 215.6% higher than that in the same period in 2007.
The average daily trade value for ADRs was US$ 113.4 million in the period from January to June, 2008.
412.7 million securities were traded until June this year, 77.5% higher than the same period in 2007.
Until June, ADRs had an appreciation of 65.5% versus a devaluation of 14.4% of Dow Jones.

 
-
Madrid Stock Exchange (Latibex)
From January to June 2008, 1.4 million Gerdau S.A. (XGGB) preferred stocks were traded, raising funds of € 28.2 million in the period.

·
From July 2007 to June 2008, the quotation evolution of preferred stocks at Bovespa and NYSE was the following:


 
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·
In the 2nd quarter 2008, net income of Gerdau S.A. reached R$ 1.5 billion, equivalent to R$1.07 per share. This profit was basically originated from the equity equivalence on the investments in controlled/associated companies, and was 74.7% higher than that in the 2nd quarter 2007. In the year accumulated (1st semester, 2008), net income reached R$ 2.3 billion, 29.5% higher than the same period in 2007.

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On June 30th, 2008, the net equity of the Company was R$ 15.3 billion, representing a book value of R$ 10.77 per share.

Gerdau Ameristeel Corporation

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On September 4th, the shareholders of the Company will receive dividends related to the 2nd quarter 2008 at the value of US$ 0.02 per share, based on the positions held by the shareholders on August 20th.

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Share Liquidity
 
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Toronto Stock Exchange
Gerdau Ameristeel (GNA) stock trade transactions totaled Cnd$ 1.5 billion in the first six months of 2008. 95.8 million securities were traded in the period.
The average daily trade value was Cnd$ 12.0 million.

 
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New York Stock Exchange (NYSE)
Gerdau Ameristeel (GNA) stock trade transactions totaled US$ 2.4 billion in the 1st semester of 2008, 178.2% above the same period in 2007.
The average daily trade value was US$ 19.4 million until June this year.
154.5 million securities were traded in the period.

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From July 2007 to June 2008, the quotation evolution of stocks at Toronto Stock Exchange and New York Stock Exchange (NYSE) was the following:
 

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·
Results
 
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Net revenue reached R$ 4.2 billion in the 2nd quarter 2008 versus R$ 2.6 billion in the 2nd quarter 2007, with growth of 58,7%, which is mainly due to the consolidation of the companies acquired in the past twelve months.
 
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EBITDA reached R$ 875 million in the 2nd quarter, 86.6% higher than the same period in 2007. The EBITDA margin reached 21.0%. In the year accumulated (1st semester, 2008), EBITDA reached 1.6 billion, 57.5 % higher than that in the same period in 2007.
 
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Net income was R$ 466.7 million in the 2nd quarter, 81.1% higher than that in the 2nd quarter of 2007. From January to June, net income was R$ 776.4 million versus R$ 564.6 million in the same period of 2007.

ADMINISTRATION

This document may include statements that comprise future expectations. These expectations depend on estimates, information or methods that may be incorrect or inaccurate and might not be achieved. These estimates are also subject to risks, uncertainties and assumptions, which include, among others: general economic, political and commercial conditions in Brazil and the markets where we operate, and existing and future governmental regulations. The potential investors are alerted herein that none of these expectations means a guarantee of future performance, because they involve risks and uncertainties. The company will not assume, and specifically denies, any obligation to update any expectations, since they make sense only on the date when they were prepared.

 
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